Huge Opportunities Exist in The Online Dating Space

I have spent the last few weeks digesting my thoughts and analyzing where I believe the online dating space is headed this year. After a very robust January full of meetings with dozens upon dozens of online advertisers, I believe I have a strong sense of where the opportunities of online dating lie.

The answer is distribution. Being that I work in the performance marketing space, representing hundreds of online advertisers (dating and non-dating) I would like to think I have a very strong grasp of what does and does not work for publishers. The publishers are the lifeblood of any online product or service in bringing it to the consumer.

Publishers promote specific products or services through the four main online channels. These channels are comprised of websites & banners, email, search and social networks. For a product or service to get distribution in the performance space, it must be attractive to the publishers, convert for the publishers and (most importantly) be profitable for all parties.

Given that online distribution has changed at a robust rate in the last six months or so due to the deepening global recession, so have the distribution costs. It is one thing to purchase distribution on a CPM basis; it’s a whole other thing to purchase it on a CPA basis through performance networks. There is without a doubt more inventory available at affordable rates today than in recent years. These rates have opened up many more opportunities for publishers to promote at highly scalable and profitable rates on both a CPA and CPM basis. Due to falling CPM rates, publishers are finding creative, profitable and highly scalable ways to purchase on a CPM and back into an effective CPA.

With this highly scalable traffic, the publisher focus becomes specific to offers that not only are profitable, but that are consistent over time.

So why does consistency matter?

Traditionally, there have only been a few large online dating sites that have been successful in the performance marketing space. The sites that have been the most successful for the past few years are the ones that have built out partnerships with performance networks – this is an indisputable fact. Due to unforeseen circumstances many of these larger sites through unique circumstances have not been as active in their promotional methods of late.

This lack of activity has dramatically shifted the market share landscape in the last several months. Dating sites that have not traditionally been as active or successful at utilizing performance networks have realized huge surges in activity and membership. Many are attributing this upswing in activity due to the economic woes, falsely crediting that users have for the most part organically reached their sites. While this may be partially true, it is not the real reason for the increases.

The real reason why these sites have realized huge upswings is because the sites that were previously active in the performance network space have pulled back. By being active in the performance network space, you get what one search AOR can deliver times ten. It is like having one hundred “portal partnerships” which are not portals.

By working in the performance network space, you may or may not have one single source of traffic as large as a single portal partnership; but you will have many more, which are smaller. These smaller relationships equate to a lot more overall distribution and coverage. A naturally occurring blanketing affect occurs through working with a performance network(s). Blanketing refers to reach, branding and overall consumer awareness.

The pullbacks that have occurred have resulted in a lack of, “blanketing”. Due to this, sites that have traditionally not fared as well or that were not as active in the performance network space are now benefiting. In short, there are fewer competitive barriers to entry. These sites have for the most part stayed constant with their marketing efforts and have even pulled back somewhat themselves in how they were marketing – mainly through portal partnerships.

I view all top online dating sites as being in a current throttled or even neutral state. No one is really promoting aggressively, and the traditionally larger dating sites are so focused on partnership portal marketing that they are not utilizing their largest asset, which are performance networks. It should be noted that traditionally, performance marketing has driven online dating sites growth.

In addition to all of this, there has been a huge lack of innovation when it comes to acquisition and retention in the space. Most dating sites are acquiring users in the same like fashion, yet spending little or no effort on retention. This is completely wasteful marketing and management. There is a plethora of unrealized potential, likely resulting from so many of the top dating sites being in a state of content, internally viewed as cash cows.

Dating sites that have their subscription business down pat, that are innovative, visionary and able to execute have a huge opportunity to gain market share and expand. There has never been a better opportunity to expand and to grow, as there is now. Traditionally, the online dating vertical has been very difficult to break into; this is most definitely not the case these days.

I would not predict that a site that is currently not in existence would come out of the blue and take away large market share from some of the top five or even ten sites. I would however predict that a site in the top twenty to forty could rise up and take significant market share in the next eight to sixteen months, perhaps sooner. On the flip side, with some well thought out changes, one of the larger sites could easily dominate the market right now.

If the dating sites that are currently in the top ten want to stay in these spots, now is the time when they need to work with performance networks or at the very minimum to focus on retention. Anyone can get a user to sign up for a dating site, but few can convert them into paying subscribers who are re-billable.

Some sites are able to acquire users at minimal rates with impressive scale, but unable to monetize the users into subscribers. Some sites are able to convert users into subscribers, but can’t retain them. Some are able to acquire and retain them, but are not able to scale. There does not seem to be any one site at this point in time that can do it all effectively.

So which sites are going to come out on top?

I have had a very close eye on several select sites for some time. These are sites that are managed by executives with vision and a passion for innovation and execution. These innovative sites are finding new methods of acquiring users and harnessing technology to the fullest extent. They understand, or are very close to understanding, how to convert their users into subscribers and tailor the messaging they send to their users based on preferences and historical usage patterns.

These sites fully monetize their users in a forthright and respectful manner. They are on the forefront of the social networking movement. They are 2.0 innovators, yet able to keep their sites simplistic and easy to navigate. A few of these sites are about to become front and center in the dating space in the months ahead. On the other hand, perhaps they are ripe for acquisition by some of the larger dating sites in the space.

If there is one constant that exists in the online dating space currently, it is “opportunity” related to simple economics that are happening across major distribution outlets.